European Network(Retail and Business Banking)

Developing a European network is fundamental to Triodos Bank. It allows it to build and share expertise, and use it to benefit a fast-growing Triodos Bank community. It brings a credible set of values-based financial services to hundreds of thousands of business and personal customers, and grows sustainable banking’s scale and impact. While Triodos Bank’s values bind customers and co-workers, there are important differences between countries. Regulations, tax incentives and government approaches to sustainability are sometimes markedly different in diverse markets. Local culture, within and between countries, also impacts on how Triodos Bank approaches its work.

Retail activities developed further in 2017 as people and sustainable enterprises continue to choose to partner with Triodos Bank.

While the Spanish office is managing costs well, it is in a steep transition curve, dealing with a declining short-term interest market. Its business has shifted focus from renewable energy to SME lending and will take some time to start delivering significant revenue. The German branch remains on course for operational break-even in 2018. We are very pleased with the progress of the French activities in Triodos Finance, supported by Triodos Bank in Belgium. We are encouraged by these results, and continuing our preparatory work to establish a French branch, subject to business priorities, regulatory and other approvals.

Loans

The growth of the quality and size of the loan portfolio is an important indicator of the contribution Triodos Bank makes towards a more sustainable economy. All the sectors it works in qualify as sustainable and the companies and projects it finances contribute to delivering Triodos Bank’s mission (as detailed below).

Outstanding loans per sector in 2017

To make sure that Triodos Bank only finances sustainable enterprise, potential borrowers are first assessed on the added value they create in these areas. The commercial feasibility of a prospective loan is then assessed and a decision made about whether it is a responsible banking option. The criteria or guidelines Triodos Bank uses to assess companies can be viewed on www.triodos.com.

Triodos Bank’s main focus remains on the existing sectors in which it has already developed considerable expertise and where it considers more growth, diversification and innovation to be possible.

Environment 38% (2016: 38%)

This sector consists of renewable energy projects such as wind and solar power, biomass, hydro-electric, and energy saving projects. It also includes organic agriculture and projects across the entire agricultural chain, from farms, processors and wholesale companies to natural food shops. Environmental technology, such as recycling companies and nature conservation projects, is also represented.

Social 23% (2016: 24%)

This sector includes loans to traditional businesses or non-profit organisations and innovative enterprises and service providers with clear social objectives, such as social housing, loans to fair trade businesses, integration for people with disabilities or at risk of social exclusion and health care institutions.

Culture 14% (2016: 14%)

This sector covers loans to organisations working in education, retreat centres, religious groups, cultural centres and organisations, and artists.

The remaining proportion of the loan book is primarily comprised of residential sustainable mortgages, plus some limited short-term loans including overdrafts on current accounts.

The lending sectors above describe the main sectors Triodos Bank is involved in. Parts of these sectors are also financed by both Triodos Bank itself and its investment funds (see Triodos Investment Management below).

Triodos Bank’s goal is to lend between 65% and 75% of its funds entrusted to sustainable projects. The total loan portfolio, including short term loans to municipalities, as a percentage of the total amount of funds entrusted was 76% in 2017 (2016: 71%). Without the loans to municipalities, the ratio increased to 70% on the previous year (2016: 64%). After focusing on this area in recent years we have successfully brought this important ratio into balance. We intend to continue to build on and improve the ratio between loans and funds entrusted.

The quality of the loan book remained satisfactory overall. This, and a continuing focus on maintaining and diversifying a high quality loan portfolio, led to a decline of the impairments for the loan portfolio to 0.03% of the average loan book (2016: 0.10%). This is lower than we anticipated and lower than Triodos Bank’s long-term internal benchmark for impairments of 0.25%. These impairments are taken in case potential losses resulting from defaults by borrowers become a reality.

16%

Growth of the loan portfolio amounted to EUR 900 million, or 16%.

Growth of the loan portfolio amounted to EUR 900 million or 16%, exceeding expected growth of between 5% and 15%.

Investment-type loans in the public sector are included in the loan portfolio in accordance with regulations related to financial reporting. Without them the sustainable loan portfolio would have grown by approximately 19%, mainly because of the increase of the mortgage portfolio by 36%. The increase in business loans was limited to 16%. The distribution of growth over the sectors has been deliberate to achieve more diversification and to lower the risk profile of the portfolio.

Competition between banks in the lending market has revived after a period of restructuring and recapitalisation. Banks regard sustainability as an emerging market and have continued to make inroads into it, competing aggressively to take advantage of available lending opportunities.

Despite strong competition in all savings markets, funds entrusted grew by 9% across the European branches.

Funds entrusted, including savings, enable Triodos Bank to finance companies and organisations that benefit people, the environment and culture. An increase of the funds entrusted is an important indicator of Triodos Bank’s ability to attract sufficient funds to finance sustainable organisations.

Triodos Bank’s branches offer a variety of sustainable financial products and services as part of its key strategic objective to offer a full set of services to customers. This has been achieved in some branches and is being developed in others. A new personal current account was launched in the UK, during the year, for example. Collectively this led to a marked growth in funds entrusted which increased by EUR 697 million, or 9%, against expected growth of approximately 10%.

Detailed retail and business customer research took place across the group during 2017, using Net Promoter Score (NPS) methodology. This technique is widely used across the business sector to measure customer satisfaction. It is based on asking customers whether they would recommend Triodos Bank to a friend or colleague.

Triodos Bank’s NPS score across the retail group is 27 (the figure between Triodos Bank ‘promoters’ – 45% and ‘detractors’ – 17%). This figure is an overall NPS on all indicators. It is much better than the average for large banks but not as good as some direct banks. The equivalent figure for business clients is 14. Triodos’ principles as a sustainable bank are the main reason to recommend the bank according to the research. The detailed results will be used to improve our offering and service and revisited in future years.

366

In 2017, 366 organisations received total donations of EUR 84 thousand.

Together, this resulted in continuing growth in all the countries where Triodos Bank operates due in part to a growing profile, more efficient and customer-friendly account opening processes, and a receptive market keen to use their money more consciously.

By offering our savers, in some countries, the opportunity to donate part of the interest they receive to a charity, many social organisations receive support every year. In 2017, 366 organisations (2016: 390) received total donations of EUR 84 thousand (2016: EUR 173 thousand) in this way. The low interest rate climate and low interest rates on savings accounts make it more difficult, and sometimes even impossible, for some customers to donate part of the interest they receive.

Prospects

Triodos Bank’s balance sheet total is expected to grow more modestly. Growth of between 5 and 10% is expected in 2018. All branches will focus on continuing to deliver, or develop, a credible set of services. The number of customers is expected to grow in 2018 by between 10 and 15% across the Group. We want to continue to deliver a healthy loans to deposits ratio of between 65 and 75%, excluding investment-type loans in the public sector.

The sustainable loan portfolio and funds entrusted are expected to grow by up to 20% and up to 10% respectively. Triodos Bank’s ambitions are to focus primarily on the quality and diversification of its loan portfolio. In that context we will put extra effort into identifying loans to front-runners in their fields; the entrepreneurs developing the sustainable industries of the future.